There is an assumption that all saved money now is for spending at a later time, and this is the basic of modern economic theories
One single person might have very high incentive to accumulate wealth throughout his entire life (because he was so poor before), but his son/daughter might not, and his grandson/granddaughter might not, wealth seldom last more than 3 generations
What kind of people have the incentive to accumulate wealth across many generations, and why do they have such incentive?
This is coming up a lot in this thread. In any case:
Of all the persons I know coming from highly wealthy families, I would estimate that only 10-20% will end up in low-paying jobs or unemployed, consuming what wealth their parents have given to them. The rest typically follow in their parents footsteps: I have one friend who is an executive, and all 5 of his children are either working in high tier finance, are executives themselves, or are high ranking government officials. Of the low income families I know, I would say it's closer to 80% of the progeny failing to exceed the earning potential of their parents. Unless someone has a lot of hard data on thousands of families, I really find this all hard to believe, that rich parents are unlikely to produce rich offspring.
The fact of the matter is, the more money you have as a parent, the easier it is to send your child to a private school for K-12, hire nannies and educators to ensure an upbringing that produces a well-functioning adult, and provide the financial means to enter Ivy league universities (not to mention social networking connections the parents have).
Push this further to corporate entities. Ford and GE have been around for extremely long amounts of time, and many financial companies even longer (Bear Stearns: 1923, Goldman Sachs: 1869). Their durations of existing are quickly surpasses those of humans, and their wealth exponentially increasing.
I think its because you are ignoring taxation and government spending. Usually, the richer would pay more taxes, and through government spending that money, as well as newly created money -in so far the government still creates it-, would become available for anyone to compete for. In theory. In reality of course, the super rich will do anything they can to limit taxes and government spending, and/or direct the government spending to themselves for the very reason you bring up.
Well, yeah. I think the concentration of wealth causes the system to run increasingly less efficiently due to a more more concentrated influence over it.
I think you're mixing several things:
the anticyclical policy of the central bank (or equivalent)
promotion of growth through monetary expansion
wealth inequality
redistribution of wealth
They're not related to one another? Sure wealth inequality's exponential increase is related to exponential forms of investment.
Even if you have an inflationary currency, unless there are restrictions on the market, even poor people can still save by investing into fungible liquid commodities such as gold.
As Ludwig von Mises said, the changes in the supply of money serve no social purpose. The only thing they do is redistribute wealth.
Poor people can still invest, yes, but the amount of money they have to invest relative to a rich person is minute. Let's take a CEO who can invest $750,000 a year and a labourer who can invest $10,000 a year. After a ten year period in investment into equities returning 3% annually, the CEO will have accumulated $732,000 in capital gains while the labourer will have accumulated $14,600. Divide these by one another; at the end of the day, the CEO is saving 50 times as much and is making 50 times the amount of capital gain. The same gap still remains. But keeping it mind also that investment returns for persons with larger amount of wealth are often higher due to better management, there is no real chance for the labourer to catch up.
Yeah, I'm not sure what currency inflation has to do with investing in assets with interest returns.
Bonds don't have a lot to do with the inflation of a currency supply? At the end of the day, to issue the amount of bond and its return the government must print exponentially more currency, I had thought.
Such assets would also be available in a deflationary environment, and the idea that money makes more money, and thus rich will become richer faster than poor people will happen pretty much in any style of economy. Though wealthy people are also wealthy because of their knowledge about business and finances, not just because they have money, and as johnyj pointed out, wealth doesn't last through many generations. Stupid trust fund babies can quickly squander it all.
They can, but my personal experience is that they do not. Taxation is supposed to (as far as I can tell) allow for some wealth redistribution, because it pulls more money from the rich than the poor and then redistributes it, but every rich person I know does not pay very much in taxes due to the creative and perfectly legal assistance of their accountants. As wealth accumulation increases, the abuses of the government's ability to tax the wealthier classes will diminish because their influence in the operation of the government becomes that much larger. All I really have concern about is the inefficiency of the system (making it non-competitive with other countries whose governments and tax make greater investment in their human resources, like Germany) and it's potential for causing social arrest among the increasingly marginalized and debt-ridden lower segments of society. I think the decrease of federal income tax was one of the worst things to happen to the United States (though I favour diminished corporate tax).
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